The proposals outlined in the retail distribution review suggest a radical change in the way that UK financial advice and remuneration might be structured. While the RDR proposals seek to clarify regulatory requirements and encourage advisers to move towards principle-based regulation, the final outcome depends upon a consultation process which is not yet complete.
The effects of the RDR will be wide ranging but as the debate continues, it is apparent that certain areas of the review are likely to affect both adviser recruitment and retention. The changes proposed in the review are likely to shake out the current adviser population.
Some experienced advisers may find the prospect of exam study alongside existing work and family commitments to be too onerous while the increased capital requirements for certain advisers may prove uneconomic. With an insufficient number of good quality advisers currently available to service the working population, this poses not only a problem in the short term but also has implications for the future.
Without a steady stream of new recruits, there will inevitably be pressure on the market, which could shrink due to a lack of talent available to support ongoing recruitment needs.
Training and development must play an important role in attracting new blood into the industry. It is therefore very encouraging to see the RDR supporting higher standards of training and professionalism.
However, there is still work to be done to offer new entrants a structured career path with clear progression.
The RDR outlines plans for the segmentation of advice, with implications for the role of the adviser. Regulated advice will fall into three categories – professional financial planning general advice and primary advice, all with differing levels of expertise and regulatory requirements. Generic advice will be unregulated.
The role of the primary adviser presents an opportunity for firms looking to develop career progression for new joiners. Primary advisers will have lighter training requirements and could offer an entry level role for the next generation of quality advisers, who then progress to the next level by fulfilling the necessary training, development and experience requirements.
Recruiting and, more importantly, retaining the right people is one of the most important, yet often one of the most challenging tasks that any business faces.
Any business looking for new recruits should have clearly defined role profiles, containing a set of responsibilities, attributes and competencies. At the interview and selection stage, it is vital that prospective candidates are objectively measured against these criteria.
Once the recruitment process has produced a successful candidate, retaining him or her is the next challenge. In the short term, new recruits will want to see that promises made at the interview and offer stage are kept. In the longer term, understanding what motivates and inspires each individual is just as important as pay and benefits.
Providers can play a role in assisting advisers through the transition proposed by the RDR. First, with a range of flexible remuneration options, providers can help ease the transition to a new business model.
Second, there is also an opportunity for providers to share recruitment, retention and succession planning best practice, drawing upon their own expertise. Zurich’s Professional Development Foundation offers firms tailored support in this area.
Will the review herald a radical change in the recruitment or retention of key staff?
Where firms already have robust recruitment and retention processes in place, these will continue to serve them well but following a probable shakeout, the greatest challenge lies with attracting new talent into the industry. We need more advisers to ensure the provision of financial advice remains accessible to all.
Chris Gillies is managing director of Zurich Intermediary Group